The guide to student property investment, the 7 steps you must consider before investing in student property and why we believe HMOs are a more secure investment than student pods.
Step 1; Cost Per Meter
A HMO investment costs less per square metre than a student pod investment. Student pods (psqm) can sometimes be as much as 100% more expensive than an equivalent HMO property. With your HMO investment you receive the security of your assets and they are fully mortgageable, pods are not. HMOs are also much easier to sell. In addition to these factors HMOs can also return up to 3.0% higher yields in the first year alone, with the potential to increase this in years going forward.
Step 2; Specification
Cheaper student properties tend to have significantly lower specifications and are much smaller than others. Factors such as these will result in minimal rent demand; hence investing in the more expensive units can be more advantageous in the long run. These properties are usually finished to an extremely high specification, resulting in higher returns and also require less maintenance. Always ensure when deciding which property you are going to invest in, that you consider the value for money aspect and always remember that “you get what you pay for”.
Step 3; Location
Ensure your property is in a prime location. Do your research and find out exactly where it is and how accessible it is for students to commute to their University. Where are the local shops, supermarkets, pubs, bars and more importantly public transport? Aim for a property within a 15 minute commute from the University, anything further than this is a waste of time as students never want to travel too far. Finding a property with a 15 minute commute compared to one that is 30 minutes away can be the difference between you having 100% occupancy rates or not.
Step 4; Developer
Try and use developers that have a history of building Housing for Multiple Occupancy properties. Check their property portfolio; are they of a good standard? Have previous clients been happy with the results? Have the properties sustained their high standard? All of these factors should be taken into account when looking for a developer. It is vital you check all of this, as even the smallest mistake in development can result in lower occupancy rates and problems with the maintenance of the property which in turn could result in the loss of investment returns.
Step 5; Overseas Students
With the number of foreign students in the UK rapidly increasing, this rising number of overseas students and their greater availability to higher budgets means they will only live in the highest quality accommodation. In general student accommodation isn’t always of the highest quality, make yours different from the rest and give people a reason to rent from you. There is an ever growing demand for investors to provide these types of properties.
Step 6; Managing Agent
Finding the right company to manage your property is essential in the investment process, you must ensure you chose a credible company. Some investors chose to manage their own properties, which would result in higher net returns, however if you do not have the time to attend to regular maintenance issues, credit checks, tenant finding and advertising, choosing a respected company is your best option. We are happy to advise on this as we know how much time and effort really goes into managing a student let.
Step 7; The Law
You must ensure all legal aspects are covered. There are many things to be considered when purchasing a HMO property. You must ensure you register the property to be licensed, a requirement for all “Houses in Multiple Occupancy”. There are also many standards that have to be met in order for it to be registered, for example, the rooms have to be a certain size and fire doors must be fitted. As with any property you need insurance, but this would be insurance tailored to this type of property not just general house insurance.
You must work with the right partner to ensure you have all of the legal elements in place or you may be liable to fines or other legal actions against you.
If you need more information on buying the ideal property for a buy to let mortgage please email firstname.lastname@example.org or call us 0161 707 6106. Mistoria Estate Agents dedicates it’s efforts to selling property for private clients and sourcing property for the property investment market. We have a dedicated team of property professionals with a wealth of experience whose remit is to introduce buyers to our clients.